Indonesia releases new rules on export revenue repatriation for resources

• Indonesia has issued new rules requiring exporters of natural resources to receive earnings in the local banking industry, which was among new measures Jakarta announced in 2018 to support the then falling rupiah currency.
• The rupiah hit its weakest since the 1998 Asian financial crisis in Oct 18 due to capital outflows linked to rising U.S. interest rates, the U.S.-China trade war and a widening of Indonesia’s current account deficit.
• It has regained some ground in Jan 19 thanks to improving investor appetite for risky assets, though gaps in Jakarta’s merchandise trade and current account remain wide.
• The details of the new regulation, which was signed by President Joko Widodo earlier in Jan 19 and was made public this week, were similar to what ministers had revealed in Nov 18.
• Export revenues from the shipment of resources from the mining, plantation, forestry or fishery sectors must be kept in a special banking account, whether in foreign currency or converted into rupiah, effective immediately, according to the regulation.
• Exporters are allowed to take funds out to pay for imports, taxes, debts or dividends as long as they provide a supporting document to prove that the transaction is real.
• If they don’t comply, authorities could fine, bar them from exporting or even revoke their business permit.
• Indonesia has required exporters to receive earnings through onshore banks since 2012. Central bank data shows while 90% of such earnings already flow through local banks, only 15% of these funds are converted to rupiah.
• Finance Minister Sri Mulyani added that the Finance Ministry, Bank Indonesia and the Financial Services Authority (OJK) were formulating a supporting regulation, which is part of the economic policy package issued by the government in Nov 18.
• Under the regulation, there are three kinds of violations – first, exporters do not transfer their foreign exchange earnings into the Indonesian financial system; second, exporters of natural resources use the foreign exchange for prohibited activities; and third, exporters do not transfer the foreign exchange to their escrow accounts in Indonesia.
• Punishment for violators ranged from suspension to the revocation of their export permits, Sri Mulyani said, adding that the ministry would issue a regulation stipulating the penalties and the types of natural resource businesses to which the regulation applies.

External Link: https://www.reuters.com/article/indonesia-forex/indonesia-releases-new-rules-on-export-revenue-repatriation-for-resources-idUSL3N1ZO1SO

External Link: https://www.thejakartapost.com/news/2019/01/24/finance-minister-tells-exporters-to-heed-new-rule-on-foreign-exchange-earnings.html